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Renewable fuels industry waits for RFS

June 20 has come and gone. That's the date the U.S. Environmental Protection Agency (EPA) was expected to finalize the 2014 Renewable Fuel Standard. And at press time the biofuels industry and agriculture in general are still waiting to learn whether the EPA will dramatically reduce the Renewable Volume Obligations (the amount of renewable fuel required to be blended into conventional gasoline) that it proposed for the RFS last November.

The EPA’s proposal remains controversial. In fact, it has attracted the attention of the Citizens for Responsibility and Ethics in Washington. On May 28, CREW filed a Freedom of Information Act (FOIA) request with the EPA to obtain records related to the agency’s proposal to significantly reduce the amounts of renewable fuels required to be blended into transportation fuel. CREW took action after Reuters published a report “How ‘Big Corn’ lost the ethanol battle to Philadelphia refiners.” The article suggested that, in an effort to financially benefit their refineries, The Carlyle Group and Delta Air Lines, worked with congressional representatives and even White House officials to improperly influence the EPA’s proposal.

At this writing, CREW had not yet received any response to its FOIA request. Therefore, CREW was considering suing the EPA, said Melanie Sloan, CREW’s executive director. “We’re interested in investigating improper government action. Policy should be made in the best interests of Americans, not the most powerful,” Sloan said. She added that the decision regarding the RFS “should be made on the basis of facts and science, not politics.”

Reasons for the delay

The biofuels industry knew that EPA’s ruling would be postponed because the proposal had yet to be sent to the Office of Management and Budget and interagency review in early June.

Another reason for the delay has been that EPA needed to review an overwhelming number of comments on the proposal. It received approximately 300,000 comments. At the Fuel Ethanol Workshop (FEW) in Indianapolis in June, Tom Buis, CEO, Growth Energy, said that when EPA proposed to lower the Renewable Volume Obligations (RVO) last November, “it was a wakeup call for our industry.” Biofuel advocates and opponents alike flooded the EPA with comments.

The biofuels industry wanted to see the EPA’s ruling announced early, but also realizes “it is more important to get it right,” Buis added. He explained that on the RVO matter, EPA “missed the mark,” adding that the agency used the rationale of the ‘blend wall’ to roll back the percentages of renewable fuels to be blended into conventional fuel. The blend wall is the point at which the E10 (10 percent ethanol blended into gasoline) fuel market is saturated with ethanol. “If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E15 and E85,” Oil & Gas Journal reported last fall. “Advances in vehicle fuel economy and other economic factors have pushed gasoline consumption far lower than what was expected when Congress passed the [RFS] in 2007,” it added.

Buis said, however, that if EPA sticks with its methodology, “it puts the oil industry in the driver’s seat on how renewables will be used.” At FEW, Buis called for Washington to “Tear down the blend wall and let [the biofuel] industry innovate. Provide market access and consumer choice.” Buis pointed out that the biofuels industry is in a battle over market share, and that it is up against the oil industry’s deep pockets.

Prime the Pump

“If the RFS is dramatically reduced or even repealed, Prime the Pump is our best alternative,” said Ray Defenbaugh, president and CEO of Big River Resources, and chairman of the board of the Prime the Pump initiative, spoke about the new program during FEW. Prime the Pump is a marketing initiative designed to help fuel retailers install more flex fuel pumps so that they can offer consumers more ethanol blends. The three-year marketing program will be funded by ethanol producers who would voluntarily contribute a set amount of money per gallon produced. Sources declined to divulge this amount.

Since ethanol margins are currently very good and many producers have been able to pay down debt, more should be able to contribute to the Prime the Pump effort. Again, this is just a three-year initiative. If the industry wants to extend the program, it could do so in 2017, Defenbaugh said.

The Prime the Pump campaign is an industry-funded effort to get blender pumps in more locations to push past the E10 "blend wall."

The program is also receiving marketing support from industry organizations, such as the American Coalition for Ethanol, Growth Energy, the Renewable Fuels Association, state ethanol organizations and the National Corn Growers Association. “We talk to retailers 24/7 and encourage them to move forward with flex fuel pumps. Anything that will help to crack the blend wall is critical to our success,” Buis said.

Wide industry support is important, Defenbaugh added. “We have received past criticism from legislators that we haven’t been speaking with one voice. Corn growers, ethanol producers and trade organizations need to be behind this,” he said. Both he and Buis stressed that seed companies, farm equipment manufacturers and anyone who benefits from agriculture should and would want to be part of the Prime the Pump campaign.

For decades, U.S. agriculture had oversupplies of corn and soybeans, and needed new markets, Buis said. The growth of the ethanol and biodiesel industries have helped get supply and demand in balance, improving commodity prices in recent years. “As a result, agriculture has enjoyed prosperity. Anyone involved in agriculture should weigh in with their legislators and let them know how RFS is creating jobs and improving the economics of rural communities,” he said.

Consumers would also benefit, Defenbaugh says. “We have a good high octane product that is very competitively priced. We need to promote this and let consumers choose fuel based on price, quality and octane level,” said Defenbaugh.

Meanwhile, the biofuels industry and agriculture still are waiting to hear about the EPA’s ruling regarding the 2014 RFS. Many think the announcement will come this fall. But just what month the announcement will come remains unclear. It could come as early as September or may be postponed until after the November elections. Defenbaugh points out that there is currently a six vote majority in the U.S. Senate. Any decision that could hinder that majority could be postponed until after the election.

This and the future of biofuels is just another reason that more people in the industry need to step up in the political arena and ask candidates how they stand on ethanol, Buis concluded. It also shows how important market initiatives like Prime the Pump are when decisions get bogged down in Washington.